India: Iron ore production projected to fall 15% after two years of growth

Iron ore production in the country is projected to fall 15 per cent in FY18 after rising steadily for two successive years since 2014-15 as closure of seven working mines in Odisha and lesser production in Goa will weigh on total output.

The shunting out of operations of seven working iron ore leases in Odisha on January1 this year will impact production as their combined annual capacity is 20 million tonnes per annum. The mines of Serajuddin & Company, Mesco Steel and others were closed as the leaseholders failed to pay the Supreme Court mandated compensation for overproduction by December 31 deadline. The production loss would be reflected in the January-March quarter. Odisha is the country’s largest producer which contributed 102 million tonnes to the pan-India output of 191 million tonnes in last fiscal.

“During 2016-17, the iron ore production was 191 million tonnes. It is estimated that production during the current financial year may be less than 2016-17 owing to likely lesser production in the states of Odisha and Goa. Closure of mines in Odisha will have adverse impact on iron ore production. Out[ut impacted could be around 15-20 per cent,” Federation of Indian Mineral Industries (Fimi) said in an e-mail response to Business Standard’s queries.

Fimi felt that the revision in annual cap in Karnataka will only lead to marginal enhancement in iron ore production in that state. Last month, the Supreme Court enhanced the cap on iron ore mining in Karnataka from 30 to 30 million tonnes a year.

The last time the country’s iron ore production slumped was in 2014-15 when it fell 15 per cent to 129 million tonnes, from 152 million tonnes in 2013-14.

But since 2014-15, iron ore production has been expanding.

Data by the Union mines ministry shows the country’s iron ore output stood at 108 million tonnes at the end of October, 2017. Odisha till December end, produced 78 million tonnes almost the same run rate as in the previous fiscal but output is likely to show a downtrend in January-March quarter on mines closure. Odisha has an approved EC (environment clearance) limit of 120 million tonnes for its working iron ore mines. Total EC cap for working and non-working mines put together stands at 180 million tonnes.

During 2016-17, the domestic demand for iron ore was 112.51 million tonnes excluding exports. In 2017-18, domestic demand is set to rise by 7-8 per cent, according to estimates by Fimi.

In last fiscal, the country exported 30.48 million tonnes of iron ore. During this fiscal, iron ore exports was 10.11 million tonnes (till August end). Exports are likely to be much lesser during the current financial year in comparison to previous year 2016-17.

“Fall in exports will be due to likely lesser exports from Goa and continuation of export duty of 30 per cent on iron ore of Fe grade above 58 per cent. There is huge stock of iron ore lying at mine-heads mainly of fines of this grade in the states of Odisha and Jharkhand”, Fimi said.